Forget The Election Results - Greece Is Still Doomed And So Is The Rest Of Europe

Michael SnyderJune 18, 2012

The election results from Greece are in and the pro-bailout forces have won, but just barely. It is being projected that the pro-bailout New Democracy party will have about 130 seats in the 300 seat parliament, and Pasok (another pro-bailout party) will have about 33 seats. Those two parties have alternated ruling Greece for decades, and it looks like they are going to form a coalition government which will keep Greece in the euro. On Monday we are likely to see financial markets across the globe in celebration mode. But the truth is that nothing has really changed. Greece is still in a depression. The Greek economy has contracted by close to 25 percent over the past four years, and now they are going to stay on the exact same path that they were before. Austerity is going to continue to grind away at what remains of the Greek economy and money is going to continue to fly out of the country at a very rapid pace. Greece is still drowning in debt and completely dependent on outside aid to avoid bankruptcy. Meanwhile, things in Spain and Italy are rapidly getting worse. So where in that equation is room for optimism?

Right now the ingredients for a "perfect storm" are developing in Europe. Government spending is being slashed all across the continent, ECB monetary policy is very tight, new regulations and deteriorating economic conditions are causing major banks to cut back on lending and there is panic in the air.

Unless something dramatic changes, things are going to continue to get worse.

Yes, the Greek election results mean that Greece will stay in the euro - at least for now.

But is that really a reason for Greeks to celebrate?

Right now, the unemployment rate in Greece is about 22 percent. Businesses continue to shut down at a staggering rate and suicides are spiking.

So far this month, about 500 million euros a day has been pulled out of Greek banks. The entire Greek banking system is on the verge of collapse.

Meanwhile, the Greek government is still running up more debt. It is being projected that the Greek budget deficit will be about 7 percent of GDP this year.

The Greeks went to the polls and they voted for more of the same.

Are they crazy?

Someone once said that the definition of insanity is doing the same thing over and over again and expecting different results.

Unfortunately, it looks like things are going to continue to get worse in Greece for quite some time.

And the rest of Europe is heading into a very bleak economic future as well.

At the moment, unemployment in the eurozone is at a record high.

Most analysts expect it to go even higher.

To say that Spain has an unemployment problem would be a massive understatement. The unemployment rate in Spain is even higher than the unemployment rate in Greece is. In fact, unemployment in Spain is the highest that it has ever been since the introduction of the euro.

The Spanish banking system is a complete and total disaster at this point. The Spanish government has already asked for a 100 billion euro bailout for its banks.

But that might not be nearly enough.

Spain is facing a housing collapse similar to what the United States went through back in 2008 and 2009. Right now, home prices in Spain are absolutely collapsing....

Fresh data yesterday shows how desperate the crisis is becoming in Spain. The property crash is accelerating. House prices fell at a 12.6pc rate in the first quarter of this year, compared to 11.2pc the quarter before, and 7.4pc in the quarter before that. Prices have fallen 26pc from their peak.

"Fundamentals point to a further 25pc decline," said Standard & Poor's in a report on Thursday. It may take another four years to clear a glut of one million homes left from the building boom.

Meanwhile, money is being pulled out of banks in Spain at a very alarming rate. As panic spreads we are seeing slow motion bank runs all over Europe. Over the past few months massive amounts of money have been moved from troubled nations to "safe havens" such as Switzerland and Germany.

Investors are getting very nervous and yields on Italian and Spanish debt are spiking again.

Last week yields on Spanish debt hit their highest levels since the introduction of the euro. Without massive ECB intervention the yield on 10 year Spanish bonds will almost certainly blow well past the 7 percent danger mark.

The credit rating agencies are indicating that there is danger ahead. Moody's recently downgraded Spanish debt to just one notch above junk status. Spain is heading down the exact same road that Greece has gone.

The situation in Europe is very grim.

Greece is going to need bailouts for as far as the eye can see.

Spain is almost certainly going to need a huge bailout.

Italy is almost certainly going to need a huge bailout.

Ireland and Portugal look like they are going to need more money.

France is increasingly looking vulnerable, and Francois Hollande appears to have no real solutions up his sleeve.

As I have said so many times before, watch Europe.

Every few weeks there are headlines that declare that "Europe has been saved" but things just keep getting worse.

The governor of the Bank of England, Mervyn King, said the following a few weeks ago....

And that is the truth. There is no obvious solution to the problems in Europe. The politicians could kick the can down the road for a while longer, but in the end there will be no avoiding the pain that is coming.

The equation for what is happening in Europe that I have shared before still applies....

Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions

We are watching a slow-motion financial train wreck that is absolutely unprecedented happen right in front of our eyes and our politicians are powerless to stop it.

It is going to be a long, hot summer for the European financial system.

On election day in Greece, the mood was incredibly somber. Instead of celebrating, most Greeks seemed resigned to a very hard future. As an article in the Telegraph described, the entire nation seems to be grinding to a halt....

This is the election that is supposed to decide whether Greece stays in the euro. Yet as it, and Europe, face what could be their Katrina moment, the dominant sense here is not of panic, or fear, or even hope - but of a country in suspended animation, grinding to a halt. The Athens Heart shopping centre, in the southern suburbs, is polished, full of big brands, and almost totally empty of customers. "We've had five sales all day," says Steryiani Vlachakou, the assistant in the Champion sportswear store. "It's been getting a lot, lot worse."

Sadly, it is not only Greece that is doomed.

The truth is that all of Europe is doomed, and when Europe falls the entire globe is going to feel it.

So get ready for the hard times that are coming. The pain is going to be immense and most people are not even going to see it coming.

Like a lot of the EU, since they are losing population when a married Greek couple has only one child on average, they imported workers.
Unfortunately then many of those workers quickly figured out socialism and went on the dole.
Yes-sir, this can just got kicked a few feet down the road.

—We are watching a slow-motion financial train wreck that is absolutely unprecedented happen right in front of our eyes and our politicians are powerless to stop it. —

This.

However, many of us that predicted this did not realize just how much they could slow down time. I expected to be here last fall. I don’t think it will last beyond this year, however. Heck, I think our election cycle will be one of the catalysts that move it closer into real time.

two guys are “training” to jump the grand canyon.
One sits on the couch eating junk food and watching Jeopardy reruns.
The other runs, takes supplements, weight trains, and practices jumping technique.
He’s still gonna plunge to his death.

11
posted on 06/18/2012 8:22:36 AM PDT
by MrB
(The difference between a Humanist and a Satanist - the latter knows whom he's working for)

It’s pretty much a demographic problem. I don’t think my own children will kill me but when grandchildren come along, I’m not turning my back on them ..... our growth rate isn’t really all that bad, but I doubt they will appreciate being handed the huge bill for the last several years.

The Greeks don’t have any kids to tie their debt tin can on to. A lot of German women have decided not to have children, so same-same, and Germany is supposed to be the EU `powerhouse.’

The main reason Europe has gotten away so long with `cradle-to-grave’ spending is that we were paying for their security. Now their biggest problems are internal, the old: `We imported mongooses (mongeese?) to kill the flying carnivorous lizards, then baboons to kill the mongeese and now the baboons are hunting us ... ‘ dilemma.

All of this (except the immediate bizarre baboon analogy) is from Steyn’s `America: Armageddon.’

The clock is ticking and yeah, we’re pretty much doomed. All of us.
Well, I’m going to go lay a hardwood floor. Work that Americans won’t do, doncha know. BLOAT.

—When you go in the hole, year after year, paying out more than you are taking in, disaster is the only possible result.—

And the whole western world has been doing that for a very long time. But the ride is clearly over. It is why I thought, back in 2008, that only a fool would want to be president. Which gives one an idea of what I thought of the two candidates then, as well as the two candidates now.

What sane man actually seeks the position of responsibility for a system that is on the verge of collapse and there is no human solution?

FWIW, I actually got the analogy from Discipleship Dynamics. A person “working their way to heaven” is no better off than a person breaking all of the commandments with impunity. In the end, neither can jump a chasm that wide. It takes the blood of Christ to bridge the gap.

It works great for any situation where those that try really hard are no closer to the goal than those that don’t bother trying at all.

France is increasingly looking vulnerable, and Francois Hollande appears to have no real solutions up his sleeve.

As Margaret Thatcher said, more or less, Socialism works until you run out of other people's money. Perhaps the USA will step up and spend a few trillion to prop them up until after the election. Why budget when you can borrow, print, and blame Bush and the greedy rich?

Of course the rich are already paying their "fair" share, but it is a moving target.

“On Monday we are likely to see financial markets across the globe in celebration mode.”

Not the American market, investors have seen the light. The bailout money isn’t even going to Greece, it’s going to the broken Euro banks than loaned Greece money. The bailouts are paying interest (not principal) on money already spent. The debt remains and more interest must be paid again soon.

And...22% of the latest bailout comes from Italy. That’s called contagion. Think of the old game called musical chairs.

Greece is getting no lasting benefit, and the broken banks are only being kept open temporarily as Greece can’t make its payments.

At some point, political pressure will stop the waste of the bailouts and the piper will be standing there with his hand out. Then the real violence will begin.

18
posted on 06/18/2012 9:12:35 AM PDT
by SaxxonWoods
(....The days are long, but the years are short.....)

I constantly misunderestimate the ability of sovereign governments to delay the day of reckoning, especially the USA’s ability to do so. I am constantly wrong.

I use to try to invest based on knowing what was coming, but my timing has been so far off, I’ve given up. Fortunately this haven’t hurt me financially as at least I was poised for what was coming. I just thought I could make much more off of knowing, but I am always so wildly wrong on the timing, I make small amounts, not big as hoped.

At this point, I am just aiming for 100% safety and the heck with gains. Call me a coward, but it lets me sleep well at night.

“What sane man actually seeks the position of responsibility for a system that is on the verge of collapse and there is no human solution?”

I doubt very seriously that any election will solve this problem myself, especially when one candidate is a communist (D) and the other a socialist (R). When your debt exceeds your ability to pay it off, and you are merely paying the interest, then the point of insolvency has already been reached, and then it becomes a matter of creative accounting as to how long it can be concealed. Both parties are going to ignore this as long as they can- and pass the buck to each other until the collapse.

26
posted on 06/19/2012 6:32:23 AM PDT
by GenXteacher
(You have chosen dishonor to avoid war; you shall have war also.)

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